Modvat credit cannot be denied for curable invoice defects when duty-paid inputs were received and used in manufacture.

Modvat credit cannot be denied where duty-paid inputs were admittedly received in the factory and used in manufacture, even if the invoices or gate passes contained technical defects such as late endorsement, missing pre-printed serial numbers, lack of pre-authentication, use of original copies, or dealer-side irregularities. Procedural lapses, especially during a transitional period with relaxed requirements, were treated as curable and insufficient to defeat substantive credit when duty payment and receipt of goods were not disputed. The same reasoning meant that such documentary deficiencies did not justify penalties against the recipient, and any separate doubt about duty payment had to be pursued through demand proceedings rather than rejection of credit on technical grounds.

---

---

Issues: Whether Modvat credit could be denied, and penalties sustained, merely because the invoices or gate passes suffered from technical or procedural defects such as endorsement after the cut-off date, absence of pre-printed serial numbers, lack of pre-authentication, use of original instead of duplicate copies, invoices issued by dealers without godowns or by unregistered dealers, sale in transit, or allied documentary irregularities, where receipt and use of duty-paid inputs in manufacture were not in dispute.

Analysis: The disputed credits related to inputs admittedly received in the factory and used in the manufacture of final products. The objections went only to documentary irregularities, many of which arose during the transitional period when relaxed procedural requirements were operating under the relevant notifications and Board circular. The defects were treated as curable or minor, and the authority held that substantive credit could not be denied for procedural lapses when duty payment and receipt of goods were not challenged. The authority also noted that, where any doubt about duty payment existed, action could have been taken under the demand provisions, but the credit could not be rejected on technicality alone. On the same reasoning, the consignor-side deficiencies did not justify penal consequences against the recipients.

Conclusion: Modvat credit was admissible despite the technical defects, and the penalties were not sustainable.

---